US rare earths champion says Pentagon deal not easily replicable

MP Materials Corp., the US rare earths producer that’s received government investment to support construction of domestic capacity, is warning the unprecedented move won’t be easily repeated for other companies.

The Pentagon agreed to a $400 million preferred equity investment in MP in July, not long after the US faced the threat of industrial shutdowns triggered by China’s curbs on exports of rare earth magnets. The deal — also including a supply agreement with a guaranteed floor price — was seen as a transformative moment for an industry plagued by cycles of boom and bust even before this year’s crisis.

The move also triggered widespread discussion about how much support could be extended to other companies, both inside and outside the US. Chief executive officer James Litinsky, who co-founded MP in 2017 to resurrect a dormant Californian mine, said the company’s spectrum of assets — from mines to magnet plants — was one key to the deal.

“One unique thing that we offered is that we’re the only company in the world that’s fully vertically integrated, and if the government is going to support a solution, they need to make sure that the solution works,” Litinsky said in an interview on the sidelines of a rare earths event in Toronto. “You really have to have a full supply chain offering before you go to the US government” for support, he added.

The Pentagon deal was put together after Beijing’s grip on global supply of rare earth magnets proved pivotal in fighting a trade war with Washington. It also constituted a major government intervention to ensure future supply of a strategic product on national security grounds, and it meant the Trump administration has effectively created a national champion.

MP Materials’ shares have more than doubled since the Pentagon investment was unveiled, and rare earth stocks worldwide have soared as prices for the critical materials rally. The Australian government is also considering a floor price for rare earths, and there’s growing expectation for a bifurcated global market in which producers outside China have more protection against volatile prices.

Litinsky said America’s interventionist tack should ultimately create “normal” market pricing for ex-China producers. “The Chinese are going to come to a realization that it’s a fool’s errand to attack this industry,” he said on a conference panel earlier.

Another major talking point at the Toronto event was just how quickly the US is ramping up its own capacity, partly as a result of earlier investments and partly in response to the China shock this year. Adamas Intelligence, the consultancy and organizer of the Toronto event, sees domestic US magnets capacity briefly matched with demand in 2028 before demand from sectors like robotics, drones and electric vehicles takes off.

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